Principles of Micro-Economics Wk4 Discussion

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1 Week 4 Discussion Week 4 Discussion Principles of Micro-Economics Starlynn LaBeaux Professor Morales June 23, 2022

2 Week 4 Discussion

3 Week 4 Discussion Week 4 Discussion The Market Structure The term "competitive market" refers to a condition in which the level of competition is optimal. Most of the products offered by the market's many merchants are similar. These two characteristics sum up the market as a whole. Consider the milk market as an example. It is hard for any client to influence the milk price since individual customers buy such a small amount of milk in contrast to the whole market. Dairy farmers also have little impact on milk prices since there are so many different milk suppliers that it is almost impossible to tell which one is which. There is no incentive for a seller to lower his pricing since he can sell as much as he wants at the current price, and if he raises it, buyers will shop elsewhere. Because they must accept the price set by the market, buyers and sellers in competitive markets are referred to as "price takers. Many people feel that to have a genuinely competitive market, firms must be able to enter and exit at will. The following are three more examples of optimal competition:  Cultivation: This market has a lot of products that are pretty similar to each other. Examples of generic crops, such as those produced by many farms, are carrots, potatoes, and grain.  International Exchange: In the international exchange market, traders purchase and sell currencies worldwide.  Purchasing Online: We may not even consider the internet a different market. Monopolistic Sometimes monopolies are competitive, while other times they are monopolistic. Because there are fewer suppliers, a fierce rivalry is less likely, making it critical for small businesses to coordinate their communications wisely. There are many sellers in competitive marketplaces, yet each of them is tiny when compared to the market as a whole. There isn't a condition of perfect competition here since each retailer offers a product that differs somewhat from the other merchants. Product differentiation, many enterprises in the market, freedom to join and leave the market in the long term and a degree of market power are all characteristics of monopolistic competitive marketplaces. Both buyers and sellers have imperfect knowledge of these markets. Examples of monopolistic competition include:  Restaurants and their owners.  Inns and taverns.  The retail industry as a whole.  Consumer services, such as hairdressing, are included in this category.

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4 Week 4 Discussion Many suppliers provide similar or identical items in an Oligopolistic market system. It's possible to teach game theory via oligopoly analysis, which examines how individuals act strategically. While we talk about a "strategic" scenario, we imply one in which a person has to think about the reactions of others to the actions she does when making decisions. Checkers, chess, and tic-tac-toe are all games that require strategic thinking, but so make many business choices. The limited number of players in oligopolistic marketplaces necessitates strategic decision-making on the part of each enterprise. Each company is aware that its profit is a function of its output and the output of its competitors. Each business in an oligopoly should consider how its choice will affect the production decisions of the other companies in the market when making its production decision. Here are a few instances of oligopoly:  The National Broadcasting System  Publications Covering the News  Obstacles in the way Because no other companies are offering that product, a monopoly is formed. Monopoly status is conferred to a business when it presents its development only to it and when there are no close substitutes. The primary cause of trust is the presence of barriers to entry. Because other firms cannot enter and compete with it, a trust continues to be the sole vendor in its market. When it comes to putting up barriers, there are three main factors:  Monopoly resources: A critical resource is controlled by a single company and is essential for production.  Government regulation: A single corporation is given the exclusive right to manufacture a particular commodity or service by the government.  The production process: One company may create output at a lesser cost than a more significant number of companies. The idea behind marginal analysis is that rational choices are made when the extra advantages resulting from a decision are more significant than the costs that come about as a consequence of that option. In this scenario, companies base their choices about production and pricing on marginal income and marginal cost to optimize their operations. A study of the extra advantages of activity compared to the increased expenditures incurred by that activity is meant by the term

5 Week 4 Discussion "marginal analysis." To assist them in making decisions that will allow them to realize the tremendous possible amount of potential profit, businesses use marginal analysis as a decision- making tool. How choices are made regarding both production and pricing:  If the price is set by the market and all participants in the market are subject to the same fee, perfect competition exists. In other words, the demand curve is flat. In this case, the only choice is how much to make.  This market structure is characterized by many suppliers, each of whom offers a unique product to customers. The distinctions between these identical items may be only perceptions, but the buyer is aware of them either way.  A single seller can only sell commodities under a monopoly. As a result of this, there is absolutely no competition. The monopolist has total control over the price, with the only limitation being the demand. To maximize profits, the monopolist is accountable to the buyer's requirements.  This market is an "oligopoly," which means that there are just a few vendors. Each business can see exactly what the other companies are up to as soon as they do it because of the phrase "few." Competitive price matching and non-compliance are the norms in markets with oligopolistic pricing structures.

6 Week 4 Discussion Conclusion  Perfection Numerous buyers and many vendors are hallmarks of competition. Almost all of the items in the market are the same from one vendor to the next.  Multiple vendors, product differentiation, and free entrance and departure are hallmarks of monopolistic competition.  Oligopoly is characterized by a high degree of interdependence and concentration in a single industry.  Government control, barriers to entry, monopolistic resources, and the manufacturing process are all monopolies.  There are two types of marginal analysis.  The pricing and output choices.

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